"In Parliament, I've seen grown men cry over MPs' expenses"

If you think MPs are over-paid, think again. An anonymous MP explains how a flat salary and little chance of ministerial perks cause misery over childcare costs and mortgage payments.

In the pig swill of Westminster something new is stirring.

After two decades of MPs arguing for more pay colleagues are falling over themselves to forego any pay rise, ever. Not now. Not in the future, but please let me keep my pension is the sotto voce subtext.

“I’m happy with my salary,” a headline screams. This young mum will soon learn that childcare costs when you work to midnight will eat it up. Hope she’s got an overdraft or a rich husband. Nick Clegg starts an inevitable Dutch auction by pledging to forego any rise. Easy for him now his rich wife doesn’t have to pay those private school fees after all.

There’s a sigh of inevitability from colleagues as each leader comes out to condemn any pay rise. They’re always first in the queue (we’d be hammered if he didn’t, said one advisor) these leaders with their generous Government salaries, rich wives and ministerial cars.

But this time less anger from the rank and file. And in a sign that the troughs of mud covered expenses have been well and truly emptied there is a palpable uncomfortable feeling about being paid more.

The impending election fills us with dread as candidates will be pressured to declare that they will forgo the pay rise. Easy for the candidate with no hope of winning. A different matter if you have a mortgage to pay. “It’s our job,” says one colleague plaintively.

Tory A-listers are still reeling. Many sacrificed good careers with prospects for a flat salary and little chance of a ministerial job. I’ve seen grown men in tears because of the system of expenses that pillories MPs and makes many afraid to claim.

Others say that you need money to do this job now, “I’m lucky I did well in a previous life so I don’t need to claim anything”, one told me sanguinely in the coffee queue. Not uncommon. And there’s the female MP whose husband gave up his job to do the childcare because it doesn’t pay him to work. Not uncommon with many families but most people imagine MPs can afford full time nannies. The reality is far from that for most.

The young families are struggling the most. If they have a London mortgage or rent (and as we spend half a week in London a number do) the maths just don’t work.

Bravely Mark Pritchard sticks his head above the parapet to declare that Parliament must not be just for the privileged. Multi-millionaire and hero of the working man Adam Afriyie has been brave (and rich) enough to repeat this for three years.

All parties unite in a bit of “why do we do the job” “how often do you think about giving up?” moaning. Well, there’s a long queue of people keen to take it on. Though in some seats the shortlists these days are very short. The reality check about the money and the prospects increasingly makes wannabes think twice. And many walk away.

Pritchard and Afriyie are right. This place must not become a place just for the privileged. Richer MPs will forego more pay because they can. The poorer will because they feel guilty. And this is why we set up an independent body to take the decision out of our hands.

There is one unifying cry – we created the monster that is now putting us  through this prolonged agony of a pre-announcement, a speech and then (oh wait for the abuse) a public consultation before any decision.

So we are to blame for a body which pays its communications official £20,000 a year more than MPs.

There is never a good time to increase MPs’ pay but doing a catch-up every five years will always mean it is too much. So why isn’t the salary linked to another job that the public understand? Should MPs be offered two thirds of a GP’s salary or three quarters? And while we’re at it let’s stop the lunacy that describes employing staff to respond to constituents as “expenses”. If anything underlines the other worldliness of Parliament, that does. 

Now read Eleanor Margolis explain why we need our MPs to be less "moaty" - ie professionals, not wealthy hobbyists.

 

The Houses of Parliament. Photograph: Getty Images
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Let's turn RBS into a bank for the public interest

A tarnished symbol of global finance could be remade as a network of local banks. 

The Royal Bank of Scotland has now been losing money for nine consecutive years. Today’s announcement of a further £7bn yearly loss at the publicly-owned bank is just the latest evidence that RBS is essentially unsellable. The difference this time is that the Government seems finally to have accepted that fact.

Up until now, the government had been reluctant to intervene in the running of the business, instead insisting that it will be sold back to the private sector when the time is right. But these losses come just a week after the government announced that it is abandoning plans to sell Williams & Glynn – an RBS subsidiary which has over 300 branches and £22bn of customer deposits.

After a series of expensive delays and a lack of buyer interest, the government now plans to retain Williams & Glynn within the RBS group and instead attempt to boost competition in the business lending market by granting smaller "challenger banks" access to RBS’s branch infrastructure. It also plans to provide funding to encourage small businesses to switch their accounts away from RBS.

As a major public asset, RBS should be used to help achieve wider objectives. Improving how the banking sector serves small businesses should be the top priority, and it is good to see the government start to move in this direction. But to make the most of RBS, they should be going much further.

The public stake in RBS gives us a unique opportunity to create new banking institutions that will genuinely put the interests of the UK’s small businesses first. The New Economics Foundation has proposed turning RBS into a network of local banks with a public interest mandate to serve their local area, lend to small businesses and provide universal access to banking services. If the government is serious about rebalancing the economy and meeting the needs of those who feel left behind, this is the path they should take with RBS.

Small and medium sized enterprises are the lifeblood of the UK economy, and they depend on banking services to fund investment and provide a safe place to store money. For centuries a healthy relationship between businesses and banks has been a cornerstone of UK prosperity.

However, in recent decades this relationship has broken down. Small businesses have repeatedly fallen victim to exploitative practice by the big banks, including the the mis-selling of loans and instances of deliberate asset stripping. Affected business owners have not only lost their livelihoods due to the stress of their treatment at the hands of these banks, but have also experienced family break-ups and deteriorating physical and mental health. Others have been made homeless or bankrupt.

Meanwhile, many businesses struggle to get access to the finance they need to grow and expand. Small firms have always had trouble accessing finance, but in recent decades this problem has intensified as the UK banking sector has come to be dominated by a handful of large, universal, shareholder-owned banks.

Without a focus on specific geographical areas or social objectives, these banks choose to lend to the most profitable activities, and lending to local businesses tends to be less profitable than other activities such as mortgage lending and lending to other financial institutions.

The result is that since the mid-1980s the share of lending going to non-financial businesses has been falling rapidly. Today, lending to small and medium sized businesses accounts for just 4 per cent of bank lending.

Of the relatively small amount of business lending that does occur in the UK, most is heavily concentrated in London and surrounding areas. The UK’s homogenous and highly concentrated banking sector is therefore hampering economic development, starving communities of investment and making regional imbalances worse.

The government’s plans to encourage business customers to switch away from RBS to another bank will not do much to solve this problem. With the market dominated by a small number of large shareholder-owned banks who all behave in similar ways (and who have been hit by repeated scandals), businesses do not have any real choice.

If the government were to go further and turn RBS into a network of local banks, it would be a vital first step in regenerating disenfranchised communities, rebalancing the UK’s economy and staving off any economic downturn that may be on the horizon. Evidence shows that geographically limited stakeholder banks direct a much greater proportion of their capital towards lending in the real economy. By only investing in their local area, these banks help create and retain wealth regionally rather than making existing geographic imbalances worce.

Big, deep challenges require big, deep solutions. It’s time for the government to make banking work for small businesses once again.

Laurie Macfarlane is an economist at the New Economics Foundation